UBS downgrades GM to ‘neutral’ as it sees impact on earnings from tariffs

Investing.com -- UBS downgraded General Motors Co (NYSE:GM) to “Neutral” from “Buy” and lowered its price target to $51 from $64, citing the expected earnings impact of potential tariffs and weaker North American vehicle volumes.

The brokerage lowered its 2025 and 2026 earnings estimates, projecting that tariffs on vehicles imported from Mexico, Canada, Korea and China could significantly increase GM’s cost base.

Trump on Wednesday said he had authorized a 90-day pause on "reciprocal" and 10% tariffs, effective immediately.

UBS estimates an unmitigated annual cost headwind of around $5 billion, though it assumes GM will recover about half through pricing strategies.

In 2025, we now assume GMNA volumes decline 9% year-over-year, with an additional 4% decline in 2026, UBS said in a note.

The firm now expects GM’s 2025/2026 auto EBIT to fall to $10.1 billion and $7.5 billion, respectively, down from $12.1 billion and $10.4 billion.

EPS estimates were cut to $10.59 and $8.90 for 2025 and 2026, from $12.25 and $12.65. Auto free cash flow projections were also revised sharply lower.  UBS has paused the buyback in its financial model.

UBS maintained its 2.5x EV/EBITDA valuation multiple but applied it to reduced earnings forecasts, resulting in a new price target that implies 5.7x 2026 P/E—below the historical average of 6.6x.

A multiple towards the low end of the historical 5-8x range is warranted given the high level of uncertainty around both the cost and volume impact, analysts wrote.

Despite the downgrade, UBS expects GM to post a solid first quarter, forecasting Q1 2025 EPS of $2.89, about 9% above the consensus.

However, it warned guidance may be withdrawn due to macro and tariff-related uncertainty.